Gap Stock Plunges Amid Lower Sales Forecast and Old Navy CEO Departure Announcements
One day after announcing that it is cutting its growth forecast for the current quarter and that Old Navy’s CEO is leaving the company, Gap shares dropped dramatically during a tense trading day Friday.
Shares of Gap opened more than 20% lower on Friday to a near two-year low after the retailer slashed its sales outlook on Thursday. Gap said it now expects first quarter sales to decline in the low-to-mid teens percentage range from its previous guidance of mid-to-high single digit year-over-year declines.
Gap shares were marked 18% lower in early Friday trading to change hands at $11.74 each, a move that would extend the stock’s year-to-date decline to around 36.25%. The venerable clothing retailer has shed more than 64% off its price over the last 12 months.
Citing “execution challenges” and a “macro-economics dynamics gap” for the lower forecast, CEO Sonia Syngal also announced that the head of the Old Navy brand, Nancy Green, was leaving the company this week. The company added, “we believe now is the right time to bring in a new leader with the operational rigor and creative vision to execute on the brand’s unique value proposition.”
Syngal will be leading the team until a successor is hired.
The setback is a bit of a surprise considering that, in the past, Old Navy has outperformed Gap’s namesake business and its Banana Republic line. It doesn’t appear its troubles are easing anytime soon.
Gap was a troubled retailer before the pandemic and the lockdown phase of the COVID-19 outbreak only exacerbated an already difficult situation. The retailer’s stock is down 60% from recent highs, and it is scrambling to attain the heights it reached 10-20 years ago.
Several apparel chains have struggled along with Gap to keep up with rising demand and manage inventories amid shipment delays. Supply chain disruptions and surging inflation have damaged retail sales hard over the first three months of the year. Meanwhile, U.S. inflation has accelerated to the fastest pace in four decades, thanks in part to record high gasoline prices and a surge in global oil prices.
For stakeholders, this means a period of volatility moving forward. With Old Navy looking for new leadership, investors may have to be patient before they see a turnaround for this segment of Gap’s retail brand. Gap is set to provide an updated fiscal outlook when it reports first quarter results on May 26.
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